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Judgment By Formula: Regulatory Form and the Differentiation of Fiscal Measures and Non-Fiscal Measures in EU State Aid Law Journal Artikel

Christopher McMahon

European State Aid Law Quarterly, Jahrgang 23 (2024), Ausgabe 1, Seite 4 - 14

The State aid rules apply to a wide range of interventions on the internal market that take a variety of different forms. This poses challenges for the case law on the identification of aid within the meaning of Article 107(1) TFEU as it seeks to adapt the standards it applies to different circumstances while avoiding formalism. Criticisms in the academic literature of the application of the prohibition on aid to fiscal measures are frequently premised on the assumption that the rules should apply in a different way to such measures on account of their relationship with the sovereignty of Member States in the field of taxation. The manner in which the law on the application of the State aid rules to fiscal measures remains unsettled. This article examines a substantial doctrinal obstacle to any form of differentiation in the standards used to identify fiscal and non-fiscal measures in the form of two related maxims which recur throughout the case law. The first holds that aid is defined in relation to its effects. The second is that regulatory technique is irrelevant to the classification of a measure as aid. This article will chart the development of these established formulae in the case law and explain their relationship to one another, arguing that they represent a significant, but not absolute impediment to the articulation of distinct standards to identify aid in the form of fiscal measures. Keywords: Effects; Objectives; Selectivity; Fiscal Measures; Taxation; Article 107(1) TFEU; Formalism

The 'Incentive Effect' and 'Start of Works' – Court of Justice Creates Confusion Journal Artikel

Ulrich Soltész

European State Aid Law Quarterly, Jahrgang 23 (2024), Ausgabe 1, Seite 35 - 39

The "incentive effect" is a rather technical issue under the State aid rules which is of huge practical importance. In a nutshell, this principle states that aid cannot be granted if the recipient had already started with the project before the application for aid was submitted. As this can lead to the complete refusal of funding, and because the recent case law - in particular the Eesti Pagar judgment (C-349/17) - is extremely harsh in defining the “start of works”, the “incentive effect” requirement has the potential to cause sleepless nights for aid recipients. Unfortunately, the most recent judgment in Est Wind Power (C-11/22) has not helped matters, but instead added to the confusion. Keywords: Incentive Effect; Aid Application; Start of Works; Early Project Start; Investment Aid

Demystifying the Balancing of the Positive and Negative Effects of State Aid Journal Artikel

Phedon Nicolaides

European State Aid Law Quarterly, Jahrgang 23 (2024), Ausgabe 2, Seite 136 - 142

A recent judgment has confirmed that the European Commission’s consideration of the positive and negative effects of State aid, in the context of its assessment of the compatibility of aid with the internal market, may be “succinct”. The meaning of “succinct” consideration is unclear. Also unclear is how the Commission performs the broader “balancing” of the diverse and often non-comparable effects of State aid. Therefore, this paper proposes that, for the sake of clarity and transparency, the Commission adopts a conceptually simpler approach which in fact corresponds to its current practice. It should state explicitly that compatible State aid must satisfy certain positive criteria without having any manifest negative effects. Such an approach would also be consonant with the case law of the European Court of Justice. Keywords: Assessment of State aid, weighing, balancing, positive effects, negative effects.

Incentive Effect of Subsidies: Empirical Research Presented Journal Artikel

Pieter Wesselius

European State Aid Law Quarterly, Jahrgang 23 (2024), Ausgabe 2, Seite 143 - 150

Incentive effect is crucial in ensuring a proper allocation of State resources to undertakings and thereby achieving important policy objectives. However, it is uncertain to what extent undertakings applying for subsidies actually require the subsidy to initiate the project. This article presents empirical evidence on the incentive effect of research and development subsidies to small- and medium-sized enterprises in the Northern-Netherlands, along with recommendations to increase the incentive effect of subsidies. Whereas it currently is enough for an undertaking to simply refrain from initiating a project before applying for the subsidy, I advocate for the undertaking to have a more pro-active role: it should argue why the subsidy is necessary for the initiation of the project. Keywords: Incentive effect; General Block Exemptions Regulation; De minimis Regulation

Case C-11/22 Est Wind Power OÜ v Elering AS · Annotation by Militsa Kostova Journal Artikel

Annotation of the Court of Justice of the European Union (First Chamber) of 12 October 2023 in Case C-11/22 Est Wind Power OÜ v AS Elering

Militsa Kostova

European State Aid Law Quarterly, Jahrgang 23 (2024), Ausgabe 2, Seite 200 - 205

The ‘start of works’ criterion as an obstacle to the fulfilment of the formal incentive effect and use of the GBER, has received little attention in academic writing. At the same time, it has created a lot of headaches on the ground - for both practitioners and national authorities. The bar for works to start is traditionally considered rather low, particularly after Eesti Pagar. Surprisingly, a new judgment about something else entirely may cautiously blow the winds in a new direction, including for the formal incentive effect criterion.

Incentive Effect of State Aid: Journal Artikel

Necessity and Counterfactual

Phedon Nicolaides

European State Aid Law Quarterly, Jahrgang 22 (2023), Ausgabe 2, Seite 132 - 149

A fundamental criterion of the compatibility of State aid with the internal market is the presence of incentive effect. State aid must be able to change the behaviour of the recipient undertakings. The purpose of this article is threefold. First, it reviews recent case law and Commission decisions on the presence or absence of incentive effect. Second, it argues that this simple, yet fundamental criterion of compatibility suffers from a serious weakness. Third, it proposes an alternative method for establishing the existence of an incentive effect. Even when the aid is granted before the start of work, it does not necessarily follow that it induces the recipient to do something extra. A savvy company that knows how State aid rules work can adjust its investment plans in such a way as to qualify for aid, even when it does not really need it. Therefore, the new approach proposed in this article goes beyond the current test of the existence of incentive effect, asking not just whether a specific investment or project would not be carried out without the aid, but also whether the project is ‘discretionary’, in the sense that it is not indispensable for the continued operation of the recipient company. Keywords: incentive effect; necessity of State aid; indispensable expenditure; discretionary expenditure

The Art of Change Management – How To Deal with the Incentive Effect in Turbulent Times Journal Artikel

Stefan Akira Jarecki, Kamil Ciupak

European State Aid Law Quarterly, Jahrgang 22 (2023), Ausgabe 4, Seite 389 - 403

The incentive effect is one of the most critical conditions for the compatibility of State aid with the EU internal market. The incentive effect means that State aid should not be granted for activities in which the beneficiary would, in any case, engage even in the absence of the State aid. If a beneficiary has decided to start a given activity receiving State aid under certain conditions, these conditions should not be changed - especially the amount of the State aid. However, we are living in turbulent times. Europe's economy was hit by the COVID pandemic outbreak, then by the war in Ukraine. All European countries have experienced a drastic price increase and are struggling with high inflation. The policy of the European Green Deal had led to drastic technological change. Many beneficiaries must buy energy and products from sources that were note initially planned. In this situation, the prohibition of changing the conditions of State aid that has already been granted may turn the incentive effect into the ‘disincentive effect’. In this article, we consider how this problem can be avoided. Keywords: incentive effect, GBER, de minimis

How Much Could the US Inflation Reduction Act Cost Europe? Journal Artikel

Eszter Hargita, Filip Puzder, Péter Staviczky

European State Aid Law Quarterly, Jahrgang 22 (2023), Ausgabe 3, Seite 242 - 266

The Inflation Reduction Act (IRA) was introduced in the US in August 2022, aiming to promote investments into clean energy production. The IRA provides huge amount of aid, which can have a draining effect of green investments vital for the green transition of the European economy. In response, the Commission adopted Temporary Crisis and Transition Framework (TCTF) in March 2023. As well as explaining the historical context and content of these subsidy-rules, this article makes an attempt to compare the subsidies available under the IRA and the TCTF, considering the maximum aid amount available under the regional aid guidelines. Keywords: Inflation Reduction Act; IRA; subsidy competition; incentive effect; operating aid; battery manufacturing; tax credit